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Uranium Week: Fleeting Hope

Commodities | Oct 18 2016

The first jump in the uranium spot price since July proved fleeting. We’re back where we started.

By Greg Peel

Three transactions were reported in the uranium term markets last week totalling 1.5mlbs U3O8 equivalent. Further deals are currently being considered.

Indeed, a number of utilities are considering mid and long term purchases, industry consultant TradeTech reports, and are expected to enter the market in the coming months. Activity is expected to gain momentum in the fourth quarter.

But this is exactly where we were in the fourth quarter of 2015. Then, too, sellers of uranium were pinning their hopes on an expected pick-up in utility demand. Yet the spot uranium price is now 35% lower than it was at the beginning of 2016. That demand has failed to materialise in any significant way. Relatively well stocked utilities have not felt it necessary to chase prices higher. Rather, they have been happy to watch prices fall further.

They have fallen further due to the need to sell becoming increasingly urgent. Spot prices are now below the cost of production for many producers. While consensus suggests uranium prices will eventually move higher, a lot of that assumption has to do with more production being shut down for cash burn reasons. A good deal of production has already been mothballed pending price improvement.

Which puts the uranium market in a similar position to the oil market. It is generally agreed that WTI prices above US$50/bbl and especially towards US$60/bbl will be met with mothballed US shale oil production being restarted, thus once again putting pressure on prices.

In the meantime, sellers of uranium are forced to take what prices they can get in the spot market. Term market demand may be on the increase but this is not translating through to spot demand of any substance. TradeTech reports four transactions totalling 550,000lbs U3O8 equivalent changed hands in the spot market last week.

The week before saw a heartening bounce in Tradetech’s weekly spot price indicator – the first since July — from a low of US$22.25/lb to US$22.90/lb on four transactions totalling 500,000lbs. Last week that price fall right back down again to US$22.25/lb.

TradeTech’s term price indicators are steady at US$23.70/lb and US$37.00/lb.

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